HWSI Realisation Fund Ltd Net Asset Value(s) (8033L)

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RNS Number : 8033L

HWSI Realisation Fund Ltd

04 May 2020

HWSI Realisation Fund Limited

(the "Company")

Net Asset Value and Investment Update

NAV

The Company announces that the unaudited cum-income net asset value per Ordinary Share as at 31 March 2020 was 61.20 pence, after deducting the 19 pence per share capital distribution by way of B share issue and redemption that was announced on 31 March. The Ordinary Shares went ex the entitlement on 6 April. Prior to deducting the capital distribution the net asset value per Ordinary Share cum income would have been 80.20 pence.

Investment Update

Shareholders will recall that in the Company's announcement dated 27 March 2020, the Board, the Investment Manager and Hadrian's Wall Capital (the "Investment Adviser") acknowledged that Covid-19 was likely to have a detrimental effect on portfolio investments. The spread of Covid-19 and the associated impact on economic activity has led to significant volatility in both the equity and debt capital markets, as well as to other market indicators such as interest rates and forecast inflation. Whilst the net asset value as at 29 February 2020 was published at a much earlier stage of the pandemic, the situation remains fluid and it is the Investment Adviser's and the Board's view that it is not possible to estimate with any certainty the impact of Covid-19 on the portfolio at this time. Nevertheless, there have been a number of specific developments in the portfolio and a number of requests for forbearance have been received from the Company's borrowers.

Forbearance requests are being dealt with on a case-by-case basis. In each case the Investment Adviser is working closely with borrowers to:

   1.    Help them survive this pandemic and continue to be economically viable; and 

2. Ensure that any forbearance tries to protect the full economic interest of the Company (both interest and capital protection)

At the date of this announcement, 10 Loans (representing a cumulative total of GBP71.1m of principal outstanding loan balances) have requested forbearance of some kind. The request for forbearance arrangements include, but not limited to:

   --      three months' deferred interest and capital payments, 

-- a proportional payment of interest due based on their actual collections as a percentage of expected collections,

-- full interest on the deployed capital and a reduced rate of interest to be charged on the variable cash at bank in the borrower SPV.

All forbearance requests and agreements are being reviewed on a monthly basis or as extraordinary circumstances arise.

As a prudent measure, with very few exceptions, loans in the portfolio have had an increase in expected losses arising from a movement in the relevant risk category solely by virtue of the fact that Covid-19 will have to a greater or lesser extent, an impact on the Company's Loans and this has to be recognised. Eight borrowers have had their risk ratings downgraded or their Expected Loss adjusted to the full level of the Risk Category. In total the Expected Credit Loss provision has increased by GBP2.7m (equivalent to 1.9p per share) during the month bringing the aggregate Expected Loss provisions to GBP28.4m.

As new facts and information come to light as to the impact of Covid-19 on the Loans, the Board will review the need for any additional provisioning and will keep shareholders updated on material developments.

The Board, after due consideration and following recommendations from the Investment Adviser, has determined that the above changes to the IFRS9 provisions to reflect the developments in the portfolio, caused by the uncertainties associated with the COVID-19 pandemic, are prudent.

Other portfolio developments

The Company announced on 27 June 2019 that one of the Company's borrowers was in the process of undertaking an equity raise or company sale. Whilst this process has been progressing, it was originally hoped that it would conclude in the first quarter of 2020 so as to ensure full repayment of the loan at its face value of GBP13 million, plus accrued interest. Whilst the Investment Adviser still believes it more likely than not that the equity raise or company sale will conclude, the timeframe for conclusion has become more uncertain owing in part to Covid19. The IFRS 9 general loss reserve has not been adjusted on this loan, including as a result of any Covid-19 impact (it being currently GBP2 million plus accrued interest). Whilst the indicated valuations of the portfolio company support a full recovery, the borrower has limited liquidity and consequently a further delay could expose the Company to the risk of material loss. In the circumstances, it is possible that the borrower might request the Company to provide additional capital for working capital purposes. The Board continues to monitor this situation closely given the significance of this loan in the overall position of the Company's loan portfolio.

Contact Details:

Hadrian's Wall Capital (Investment Adviser)

Ron Miao / Mike Schozer

Telephone [phone]

International Fund Management (Investment Manager)

Chris Hickling

Telephone: [phone]

Praxis Fund Services Limited (Administrator)

Ben Le Prevost

Telephone: [phone]

Winterflood Investment Trusts (Corporate Broker)

Neil Morgan

Telephone: [phone]

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May 04, 2020 04:24 ET (08:24 GMT)